Table of Contents

Car Loan Interest Rates: How to Get the Lowest EMI

Introduction

Buying a new car is an exciting milestone — but it also comes with a big financial decision: how you finance it. With several banks offering competitive car loan interest rates deals, including SBI, HDFC, ICICI, Canara, and Axis Bank, it’s easy to feel overwhelmed by the options.

The small details in financing can make or break your long-term wealth. That’s why understanding car loan interest rates matters more than most people realize. Let’s explore what’s currently available in India and how to get the lowest EMI without falling into debt traps.

What are Current Car Loan Interest Rates?

Car loan interest rates in India depend on factors like:

Type of lender (public vs private bank)
Loan tenure
Borrower profile (income, credit score, employment type)

As of early 2025, here are some of the latest interest rates from leading banks:

Bank	Car Loan Interest Rate
SBI Bank	9.10% p.a. onwards
HDFC Bank	9.40% p.a. onwards
ICICI Bank	9.10% p.a. onwards
Canara Bank	8.45% p.a. onwards
Axis Bank	9.40% p.a. onwards
PNB	Floating: 8.50%
Bank of Baroda	Floating: 9.15%
Union Bank of India	8.45% p.a. onwards

These rates are subject to change, so always confirm directly with the bank or via their official websites.

What Is a Good Interest Rate for a Car Loan?

A “good” rate depends on:

Your credit score
Whether you’re a salaried individual, self-employed, or government employee
The loan amount and tenure
Whether you choose fixed or floating interest

In general:

A rate below 9% is considered very good for salaried individuals with strong CIBIL scores (750+).

Factors That Influence Your Rate:

Credit history
Income stability
Down payment percentage
Existing loans or EMIs
Relationship with the bank

If you have a clean record and solid income, you may be able to negotiate even better terms.

SBI Car Loan Interest Rate

State Bank of India provides car loans with interest rates beginning from:
👉 9.10% p.a. onwards

This makes SBI one of the most competitive public sector lenders in the market.

For government employees and existing SBI account holders, the bank often provides:

Lower processing fees
Faster approval
Better customer support

You can use the SBI car loan EMI calculator on their website to estimate your monthly outflow before applying.

HDFC Bank Car Loan Interest Rate

HDFC remains a top choice for many borrowers thanks to its:

Fast digital process
Wide branch network
Flexible repayment terms

Their car loan interest rates start at:
👉 9.40% p.a. onwards

They offer both fixed and floating interest options. Use their HDFC Bank EMI calculator tool to plan ahead and avoid surprises.

ICICI Bank Car Loan Interest Rate

ICICI Bank is known for its:

Online application ease
Competitive rates
Quick disbursal

Their car loan interest rates begin at:
👉 9.10% p.a. onwards

ICICI Bank also allows customers to pre-close their loans after a certain period without heavy penalties — making it ideal for those who expect early repayment.

Canara Bank Car Loan Interest Rate

Canara Bank currently offers some of the lowest car loan interest rates among public sector banks:
👉 8.45% p.a. onwards

This makes them a strong contender if you’re looking for affordable EMIs and stable returns.

They also provide:

Higher loan-to-value ratios
Longer tenures
Special schemes for women and senior citizens

Axis Bank Car Loan Interest Rate

Axis Bank offers car loans at:
👉 9.40% p.a. onwards

While slightly higher than public banks, Axis offers benefits such as:

Instant loan approval
No guarantor required
Digital verification process

Use their car loan interest calculator to compare offers side-by-side and pick the best one for your budget.

Punjab National Bank Car Loan Interest Rate

PNB offers two types of interest structures:

Floating: Starts at 8.50% p.a. onwards
Fixed: Starts at 9.50% p.a. onwards

Floating rates are ideal if you believe future rates will drop. Fixed interest rates are ideal for borrowers who value stable, predictable monthly payments.

Bank of Baroda Car Loan Interest Rate

Bank of Baroda offers:

Fixed rates starting at 8.80% p.a. onwards
Floating rates starting at 9.15% p.a. onwards

They also offer special discounts for women borrowers and loyal customers.

Union Bank of India Car Loan Interest Rate

Union Bank of India offers attractive car loan rates beginning from:
👉 8.45% p.a. onwards

They’re especially known for:

Minimal documentation
Transparent fee structure
Support for first-time buyers

This makes them a reliable option for young professionals and entrepreneurs.

Car Loan EMI Calculator – Why You Need It

Before locking in any loan, use an EMI calculator to understand your monthly commitment.

Example:

For a ₹10 lakh car loan at 9% interest over 5 years (60 months), your EMI would be approximately ₹20,758/month.

Even a 0.5% difference in interest can save you tens of thousands over time.

You can use:

SBI car loan EMI calculator
HDFC car loan calculator
ICICI car loan EMI calculator

All these tools are free and available online.

How to Calculate Car Loan Interest

There are two main methods used by banks:

1. Flat Interest Method

Used by some banks for short-term loans.

EMI = (Principal × Rate × Time) / Number of Months

This method gives less benefit to the borrower as interest is calculated on the full principal throughout the term.

2. Reducing Balance Method

Used by most modern lenders.
Interest is calculated only on the outstanding balance each month — which means your EMI reduces your interest cost faster.

This is the better option for long-term savings.

Always ask your lender which method they use — it makes a huge difference in total repayment.

FAQs

Q: What is the current interest rate for car loans?

A: As of April 2025, car loan interest rates in India start from 8.45% p.a. for Canara Bank and it may go up to 9.50% p.a. for PNB on Fixed Rate.

Q: What is a good interest rate for a car loan?

A: Anything under 9% p.a. is considered a good rate — especially for public sector banks like Canara or Union Bank.

Q: What is the SBI car loan interest rate?

A: SBI car loan interest rate starts at 9.10% p.a. onwards, based on your credit profile and income.

Q: Where can I find a car loan EMI calculator?

A: Most banks (SBI, HDFC, ICICI) offer free online EMI calculators. You can also use third-party platforms like BankBazaar or Paisagyaan.com (coming soon)

Q: Are fixed or floating interest rates better for car loans?

A: Floating rates are generally better during falling interest environments. Fixed rates protect against future hikes.

Final Thoughts

Car loan interest rates in India range from 8.45% to 9.50% p.a., depending on the bank and your eligibility.

Here’s a quick recap:

Public banks like Canara and Union Bank offer the lowest rates
Private banks such as HDFC and Axis offer quick service and convenience.
Banks like SBI and PNB provide reliability and trustworthiness.

Your goal should be to:

Compare multiple offers
Use EMI calculators
Choose the option that suits your budget and stage in life.

Because while the car brings joy today, your EMI follows you for years.

And trust me — I know how long-term commitments can silently drain your finances.

Let’s grow wiser together.

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About the Author

I’m Om Prakash — founder of Paisagyaan.com, a blog focused on making financial knowledge simple, relatable, and useful for everyday Indians. My journey includes over 10 years of navigating the Indian stock market, learning the hard way about investments, debts and real estate.

Read About the Author in detail, who lost 75 lakh rupees during 2009 to 2019 which would be 4.5 crore now in 2025.

I share lessons from my own life — so you don’t repeat my mistakes. If you’re just starting out or have already faced setbacks, this blog is for you.